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By XE Market Analysis January 7, 2015 6:44 am
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    XE Market Analysis: North America - Jan 07, 2015

    The dollar traded posted new trend highs against the euro and other currencies. EUR-USD clocked near nine-year low of 1.1842 (EBS low) in early Asia-Pacific trade after taking out Monday's nadir at 1.1860. A subsequent bounce stalled shy of 1.1900, and the euro subsequently drifted lower. Cable clocked a new trend low at 1.5105, surpassing Monday's low by four pips and bringing the July 2013 low at 1.5102 into reach. USD-JPY lifted from the mid-118's and subsequently oscillated around 119.00. Demand was seen at the Tokyo fixing from importer corporate accounts, while a steadier tone in Japanese equity markets was conducive to yen weakness. EUR-CHF remained pressure, once again amid general euro weakness, with the cross reaching its lowest level since Dec-17, the day before the SNB intervened and cut the deposit rate to -0.25%. Swiss foreign currency reserves data for December, out today, show that reserves rose to CHF 495.1 bln (a record) from CHF 462.7 bln in November, confirming the SNB's intervention on Dec-18.

    [EUR, USD]
    EUR-USD bounces have remained shallow and seemingly of the dead cat variety. An earlier rebound stalled at 1.1896, shy of 1.1900, and the euro has subsequently ebbed to the 1.1860-70 area. The euro clocked near nine-year low of 1.1842 (EBS low) in early Asia-Pacific trade after taking out Monday's nadir at 1.1860. We remain bearish, even if Fed tightening remains a tentative proposition as markets are expecting that the ECB will announce QE at its Jan-22 policy meeting, with the central bank's concerns about disinflation outweighing the recent improvement in survey data. EUR-USD resistance is marked at 1.1900 and 1.1927-30, support at 1.1842 and 1.1800.

    [USD, JPY]
    USD-JPY lifted from the mid-118's and subsequently oscillated around 119.00. Demand was seen at the Tokyo fixing from importer corporate accounts, while a steadier tone in Japanese equity markets was conducive to yen weakness. We remain USD-JPY bullish with 'Abenomics' policies likely to maintain the dollar's yield advantage over the yen, even if Fed tightening prospects remain tentative. USD-JPY resistance is marked by former range lows at 119.96-120.09, and support is marked at 1.1835 and 1.1800-05.

    [GBP, USD]
    Cable clocked a new trend low at 1.5105, surpassing Monday's low by four pips. The July 2013 low at 1.5102, which has been our long standing target, is likely to been reached soon, and we anticipate a test of 1.5000 before long. The December version of the UK BRC shop price index was released (overnight, UK time) and came in at -1.7% y/y, re-highlighting disinflationary pressures. Cable remains in a bigger picture bear trend, which has been persisting since the July cycle high at 1.7192 and which has accelerated in early new year trade. The sharp drop in the UK December composite PMI, which at 55.4 is the lowest since May 2013, along with a CPI rate of 1.0%, will have strengthened the dovish voices at the BoE's Monetary Policy Committee.

    [USD, CHF]
    EUR-CHF has come under fresh pressure in recent days, once again amid general euro weakness, and has logged a low of 1.2007 today. Swiss foreign currency reserves data for December, out today, show reserves rose to CHF 495.1 bln (a record) from CHF 462.7 bln in November, confirming the SNB's intervention on Dec-18. The intervention was additional to the implementation of a negative deposit rate, which was cut to -0.25%, also on Dec-18. The rouble crisis and euro weakness saw EUR-CHF come under pressure in December, and on Dec-16 the cross came within six pips of SNB's the 1.2000 limit. The cross spiked to 1.2096 on Dec-18 on the intervention and the announcement of the negative deposit rate. This was the first time that the SNB has intervened in spot since 2012. With the ECB set to pursue QE, the SNB will have its work cut out to defend 1.2000 during the first half of 2015.

    [USD, CAD]
    USD-CAD punched out a new trend high near 1.1850 as oil prices continue to sink further into five-year low territory below $48 (the 2009 low at $41.68 is on the radar), which is blighting Canada's terms of trade. The August 2009 high at 1.3063 provides a big-picture target.

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